England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		29/10/2008

MR JUSTICE CHRISTOPHER CLARKE :

1. Millhouse and Mr Abramovich ("the applicants") seek an order that the appointment of Mr Cork as provisional liquidator, made by Evans-Lombe, J, on 14^th November 2007, be set aside, a declaration that the Court declines to exercise its insolvency jurisdiction over Yugraneft and an order that the petition to wind up Yugraneft, which is also before me, should be dismissed.
2. I have already decided that the proceedings against the applicants should be dismissed and declined to give Yugraneft permission to serve Mr Abramovich out of the jurisdiction. In those circumstances the petitioners accept that the petition should be dismissed (subject to any question of appeal), whereupon the appointment of the provisional liquidator will also terminate automatically; see Rule 4.31(2) of the Insolvency Rules ("IR"). However, the application is a free standing application and I deal with it accordingly. I do so on the assumption that, contrary to my earlier judgment, the applicants are not entitled to succeed in their reverse summary judgment application.
3. In essence the applicants contend:

(a) that there is not, and has never been, any need for the Court to exercise its insolvency jurisdiction in relation to Yugraneft;

(b) that the requirements for the winding up of Yugraneft as an unregistered company are not met; and

(c) that the appointment of the provisional liquidator was procured by materially misleading statements and by a failure to disclose matters of relevance and importance to the Court.

4. The petitioners contend that, on the assumption that the defendants fail in their Commercial Court applications, the Court has jurisdiction under s 221 of the Insolvency Act 1986 ("the Act") to wind up Yugraneft and should do so. They further submit that, if the Court were to dismiss the petition or set aside the appointment of the provisional liquidator, the Commercial Court proceedings would nevertheless remain on foot because:

(a) The acts of the provisional liquidator are valid notwithstanding any defects that there may have been in his appointment; s 232 IA 1986.

(b) Even if the provisional liquidator had never been appointed, the Commercial Court proceedings would still have been properly commenced. Mr Kotov, the Russian liquidator, had authority to cause Yugraneft to commence them. He did in fact authorise their commencement and has ratified them: as appears from para 38 of his second witness statement and para 24 of his third. It is common ground that his authority to do so will be recognised by the English Court without the need for any separate application or order of this Court.

Is there a need to exercise the Court's insolvency jurisdiction?

5. The jurisdiction of the Companies Court to wind up a company is markedly different from that of the Commercial Court to resolve disputes. Liquidation, as Lord Scott observed in Gamlestaden Fastigheter AB v Baltic Partners Ltd [2008] 1 BCLC 468 is," although from a financial point of view carried out for the benefit of the creditors, … a public act or process in which the public has an interest". The purpose of the proceedings is to ensure that all creditors recover in accordance with the statutory order of priorities and that all of them rank pari passu within their class.
6. Buckley, LJ expressed matters thus in Re Crigglestone Company Ltd [1906] 2 Ch 327,331-2:

"… the order which the petitioner seeks is not an order for his benefit, but an order for the benefit of a class of which he is a member. The right … is not his individual right, but his representative right …"

"The Court has often refused a [winding up] order … because the Court does not make an order when no benefit can result. If the order will be useful (not necessarily fruitful) there is jurisdiction to make it."

"The only real danger is lest petitions should be presented simply for the purpose of making costs where there is really nothing to wind up - a danger against which the Court is strong enough to defend itself."

7. In the Court of Appeal Collins, MR said:

"If there is a reasonable probability or even a reasonable possibility that the unsecured creditors will derive any advantage from a winding up, the order ought to be made"

8. Yugraneft is currently being wound up in Russia. On 14^th December 2004 Yugraneft, by its general director, declared that it was unable to meet its liabilities and applied for the appointment of a temporary administrator. On 20^th December 2004 it petitioned the Moscow Arbitrazh Court ("the Moscow Court") for its own bankruptcy. On 22^nd December 2004 the Moscow Court ordered the suspension of the powers of Yugraneft's board and the imposition of a supervision procedure under Article 62 of the Federal Law on Insolvency. On 12^th January 2005 Mr Kotov was appointed interim administrator of the company. On 19th April 2005 the Moscow Court ordered that there should be external management of Yugraneft for 18 months and appointed Mr Kotov as external manager. On 23^rd October 2006 the Moscow Court extended the term of the external management of the company. On 28^th May 2007 the Moscow Court reviewed the administration, declared Yugraneft insolvent, and appointed Mr Kotov as bankruptcy administrator for a year. On 23^rd June 2008 that appointment was extended for another year.
9. Yugraneft is an "unregistered company" within the meaning of section 220 of the Act. Sections 221 (1) & (5) of the Act provide that such a company may be wound up in the following circumstances:

"(a) if the company is dissolved, or has ceased to carry on business, or is carrying on business only for the purpose of winding up its affairs;

(b) if the company is unable to pay its debts;

(c) if the Court is of opinion that it is just and equitable that the company should be wound up."

10. Yugraneft is carrying on business only for the purpose of winding up its affairs and is unable to pay its debts. The Court therefore has the power to wind it up.
11. The apparently unlimited discretion conferred by section 221 (1) and its predecessors has been the subject of considerable definition by the Court. In Banque des Marchands de Moscou (Koupetschesky)(in liq) v Kindersley [1951] Ch 122, 115 Lord Evershed MR said:

"As a matter of general principle, our courts would not assume, and Parliament should not be taken to have intended to confer, jurisdiction over matters which naturally and properly lie within the competence of the courts of other countries. There must be assets here to administer and persons subject, or at least submitting, to the jurisdiction who are concerned or interested in the proper distribution of the assets. And when these conditions are present the exercise of the jurisdiction remains discretionary. Prima facie, if the local law of the dissolved foreign corporation provided for the due administration of all the property and assets of the corporation wherever situate among the persons properly entitled to participate therein, the case would not be one for interference by the machinery of the English courts."

[Bold added in this as in other citations]

12. As Lawrence Collins J explained in Re Drax Holdings Ltd, [2004] 1 WLR 1049 at § 24 – 25:

"The English Court will not wind up a foreign company where it has no legitimate interest to do so, for that would be to exercise an exorbitant jurisdiction contrary to international comity …"

13. In Re Compania Merabello San Nicholas [1973] Ch 75, 91 Megarry J summarised the essentials:

"(1) There is no need to establish that the company ever had a place of business here.

(2) There is no need to establish that the company ever carried on business here, unless perhaps the petition is based upon the company carrying on or having carried on business.

(3) A proper connection with the jurisdiction must be established by sufficient evidence to show (a) that the company has some asset or assets within the jurisdiction, and (b) that there are one or more persons concerned in the proper distribution of the assets over whom the jurisdiction is exercisable.

(4) It suffices if the assets of the company within the jurisdiction are of any nature; they need not be "commercial" assets, or assets which indicate that the company formerly carried on business here.

(5) The assets need not be assets which will be distributable to creditors by the liquidator in the winding up: it suffices if by the making of the winding up order they will be of benefit to a creditor or creditors in some other way.

(6) If it is shown that there is no reasonable possibility of benefit accruing to creditors from making the winding up order, the jurisdiction is excluded."

14. In International Westminster Bank plc v Okeanos Maritime Corp [1987] BCLC 450, Peter Gibson J held that the existence of a potential claim in respect of fraudulent or wrongful trading under sections 213 and 214 of the Act against officers of the company did not constitute an asset within the jurisdiction because that was a question which had to be tested at the moment when the petition was presented. But he also held that the existence of an asset within the jurisdiction was not necessary to found jurisdiction and that a winding up could be ordered provided a sufficient connection with the jurisdiction was shown and there was a reasonable possibility of benefit for the creditors from the winding up.
15. In Re Real Estate Development Co [1991] BCLC 210 Knox, J summarised the three core requirements as these:

"(1) There must be a sufficient connection with England and Wales which may, but does not necessarily have to, consist of assets within the jurisdiction.

(2) There must be a reasonable possibility, if a winding-up order is made, of benefit to those applying for the winding-up order.

(3) One or more persons interested in the distribution of assets of the company must be persons over whom the Court can exercise a jurisdiction^[1]."

16. In relation to the first requirement Knox J sought to define "sufficient connection" as follows:

"The proposition that there has to be a sufficient connection with this jurisdiction prompts the question, sufficient for what? The perhaps rather circular answer I would give to that question is, sufficient to justify the Court setting in motion its winding-up procedures over a body which prima facie is beyond the limits of territoriality. That has two significant consequences in the context of the present case. First, it seems to me to be necessary, where there is no asset within the jurisdiction at the presentation of a petition, to establish a link of genuine substance between the company and this country."

17. In Re Latreefers Inc, Stocznia Gdanska SA v Latreefers Inc [1999] 1 BCLC 271, 277 Lloyd J pointed out that the formulation of Megarry, J's principles has changed over time and that the presence of assets within the jurisdiction was no longer essential and, having cited the three requirements specified by Knox J in Real Estate Development, said:

"[Counsel for the Petitioning creditor] accepts that there are connections with other jurisdictions (though almost none with the jurisdiction of incorporation) but he says that this is not the question. It seems to me that it may be relevant to consider what connections there may be with other jurisdictions in order to answer the rather ill-defined question as to the sufficiency of the connection with this jurisdiction. If there is a clear and substantial connection with some other jurisdiction, it may be that more is needed by way of a connection with England and Wales for it to suffice as the foundation of the exercise of extra-territorial jurisdiction. Thus, in the Okeanos case [1987] BCLC 450 at 464, [1988] Ch 210 at 226–227 Peter Gibson J considered, in this context, whether there was any more appropriate jurisdiction to wind up the company."^[2]

18. In Re Compania Merabello (and in Re Allobrogia Steamship Corporation [1978] 3 All ER 423) the only asset and connection with the UK was an insurance claim by, respectively, a dormant Panamanian and a dissolved Liberian Corporation against (in each case) an English P & I Club. In each case the claims were causes of action situated in England and there was no prospect of the companies being wound up in their countries of incorporation, a matter which Megarry J treated as a relevant consideration. In Latreefers the company was a Liberian company with an English bank account and the case involved an English judgment in relation to contracts with an English choice of law clause.
19. In Latreefers No 2 [2001] 2 BCLC 116, Morritt, LJ said:

"As Megarry, Nourse and Peter Gibson JJ have all observed, the Court must have good reason to make the winding-up order, and the existence of assets here will constitute good reason in the normal course."

20. In that case the Court of Appeal declined to decide whether the three core requirements were preconditions for the existence of the statutory jurisdiction or principles to be observed in considering its exercise on the ground that there was no reason to do so. In Re Drax Holdings Ltd [2004] 1 WLR 1049 Lawrence Collins J treated them as going to the discretion of the Court. I respectfully agree. The jurisdiction of the Court is that conferred by the statute. If the discretion which the statute confers is to be exercised the three core requirements must be satisfied.

The applicants' submissions

21. Mr Alan Boyle QC, who appeared before me with Mr Richard Walford, submits that the need to establish a link of genuine substance between the company and England & Wales is not excluded merely because there is an asset in this country, and that if there is a clear and substantial connection with another jurisdiction a stronger link with England and Wales is required as the foundation of the exercise of extra territorial jurisdiction. In this respect it is material whether or not there is a likelihood of the company's asset or assets being administered by the courts of any other jurisdiction. If the asset is a cause of action with a reasonable prospect of success and there is no prospect of the company being wound up in its country of incorporation the Court may be willing to make a winding up order but it is a matter of the Court's discretion depending on all the circumstances. Even if the other factors are established, if there is no reasonable possibility of benefit accruing to creditors from the making of a winding up order, the jurisdiction will not be exercised.
22. He submits that, even if the Court had declined to grant the applicants' reverse summary judgment applications, it would still be inappropriate for the Court to exercise its winding up jurisdiction because (a) there is no need for it; (b) there is no prospect of any benefit whatsoever being derived from a winding up order; (c) there is a much clearer and more substantial connection with Russia and a stronger link with England and Wales is not shown; (d) it is not the case that there is no prospect of Yugraneft being wound up in Russia.

No need

23. Mr Kotov has powers equivalent to those of an English liquidator of an English company. In those circumstances he was entitled at common law to be recognised in England. In Cambridge Gas Transportation Corporation v Navigator Holdings plc [2007] 1 AC 508, the Privy Council said:

20. Corporate insolvency is different in that, even in the case of moveables, there is no question of recognising a vesting of the company's assets in some other person. They remain the assets of the company. But the underlying principle of universality is of equal application and this is given effect by recognising the person who is empowered under the foreign bankruptcy law to act on behalf of the insolvent company as entitled to do so in England. In addition, as Innes CJ said in the Transvaal case of In re African Farms Ltd. [1906] TS 373, 377, in which an English company with assets in the Transvaal had been voluntarily wound up in England, "recognition which carries with it the active assistance of the Court". He went on to say that active assistance could include: a declaration, in effect, that the liquidator is entitled to deal with the Transvaal assets in the same way as if they were within the jurisdiction of the English Courts, subject only to such conditions as the court may impose for the protection of local creditors, or in recognition of the requirements of our local laws."

24. Lord Hoffmann said:

"The domestic court must at least be able to provide assistance by doing whatever it could have done in the case of a domestic insolvency. The purpose of recognition is to enable the foreign office holder or the creditors to avoid having to start parallel insolvency proceedings and to give them the remedies to which they would have been entitled if the equivalent proceedings had taken place in the domestic forum."

25. Accordingly, Mr Kotov was entitled to be recognised as liquidator empowered by the insolvency law of Russia to act on behalf of Yugraneft and enabled to act on the company's behalf in England without having to start English insolvency proceedings.
26. Further, under Article 9 of the UNCITRAL Model law, which has the force of law in Great Britain:

"A foreign representative is entitled to apply directly to a Court in Great Britain."

Mr Kotov could, therefore, have given instructions for a claim to be started in the Commercial Court by Yugraneft without the need to resort to the court's winding up jurisdiction.

No prospect of benefit

27. The applicants do not submit that it is necessary to show that a winding up order is essential if the petitioners are to benefit i.e. that winding up will only be ordered as a matter of necessity; but that they must at least show a real possibility of benefit to them from the making of the order and that the making of the order will serve some useful purpose. Since Mr Kotov could, if necessary, authorise the commencement of proceedings by Yugraneft himself and has said that, if necessary, he will do so, no useful purpose is served by an order.

Absence of connection with the jurisdiction

28. The applicants also submit that there is, in any event, insufficient connection with England & Wales. Yugraneft has no connection with England, being a Russian company, now being wound up in Russia with a Russian liquidator empowered to deal with all matters arising out of the liquidation. Yugraneft has never carried on any business in England and, apart from this claim, has no assets in England.

The reasons given by the petitioners

The petition

29. Paragraph 12 of the petition contended that an order to wind-up the company would benefit Sibir as a creditor and MOGC as a contributory in that it would enable the liquidator to pursue the claims available to the company, whose estimated value exceeded the total amount of the debts owed to its creditors.

The skeleton argument

30. In the skeleton argument filed in support of the application for the appointment of a provisional liquidator no further explanation was given as to why a winding up order was needed. Two reasons were given for the appointment of a provisional liquidator. The first was that there was no good reason to delay the commencement of the Commercial Court action until after a winding up order had been made (the petition was not due to be heard until 12^th March 2008) when the primary purpose of the petition was to procure the winding up of Yugraneft in order that it might pursue the Commercial Court action. The applicants submit that that was not a good reason for having a provisional liquidator since Mr Kotov could have commenced the proceedings at once by instructing English solicitors in reliance on Article 9 of the UNCITRAL Model Law or on the position at common law. If he had felt it necessary to obtain recognition before starting the claim he could have availed himself of the straightforward procedure laid down in Articles 11 and 24.
31. The second reason was that any delay would increase the risk that Mr Abramovich would become aware of the petition, and of its purpose, and take steps designed to obstruct the pursuit of the claim. This, the applicants submit, is nothing more than the giving of a reason as to why delay was undesirable. But, since Yugraneft did not have to wait until the appointment of a provisional liquidator in order, through Mr Kotov, to start a claim, this reason had no better validity than the first.
32. The applicants also submit that the assertion that Mr Abramovich might, if he became aware of the petition, do something to obstruct the pursuit of the claim, was without evidential support. Further, if Mr Abramovich had become aware of the petition it would not have told him what assets Yugraneft was said to have in England and he could not have known that the only asserted asset of Yugraneft was the claim against him and Millhouse. He could not, therefore, have learnt that the purpose of the winding up petition was to bring a claim against him. The asserted risk that he might flee was illusory.

The witness statements

Mr Kotov

33. In his first witness statement Mr Kotov said that he could have sought recognition as a foreign representative under the Cross-Border Insolvency Regulations 2006 and pursued the Commercial Court proceedings thereafter. He explains that he did not do so for two reasons. The first was that English is not his first language and that he was not familiar with English court procedure. The second was that it would be better for the interests of Yugraneft in this country to be represented by an independent professional "who is properly authorised to act here and will do so as an officer of the High Court and who will inevitably be more familiar with these matters than I."
34. The applicants submit that neither of these reasons is convincing. Foreign litigants can and have for centuries instructed English solicitors and counsel. There is no need for a second independent professional to be interposed between Mr Kotov and English lawyers. Mr Kotov can instruct them himself. Whether the claim is brought through Mr Kotov or an English liquidator it will be handled by independent professional lawyers instructed in England. Neither the language barrier nor a desire for an intermediary between Mr Kotov and his English solicitors has anything to do with whether it is appropriate to wind Yugraneft up in England. There is no relief which a provisional liquidator, or a liquidator, could obtain for Yugraneft which Mr Kotov could not himself obtain.

Mr Friedman

35. In his second affirmation Mr Friedman contended that there was a reasonable prospect of benefit to Yugraneft if it were to be wound up in England in the form of the intended Commercial Court proceedings. The applicants contend that, while it is true that Yugraneft and its creditors stand to benefit from a successful conclusion of the Commercial Court proceedings, that is a benefit which would be derived from the Commercial Court proceedings whether or not there was a winding up order. Counsel submitted to Evans Lombe, J that "one critical issue is whether or not there is an asset within the jurisdiction giving rise to a reasonable possibility of benefit." That is, however, an incorrect test. The question is whether Yugraneft will derive benefit from the making of the winding up order, which it would not derive in its absence.

Mr Cork

36. The points made in the previous paragraphs were made in the 1^st witness statement of Karyl Nairn. Thereafter Mr Cork gave one, and Mr Kotov gave two, further statements. In his witness statement Mr Cork stated that the principal purpose of his appointment was to facilitate the commencement by Yugraneft of proceedings in the Commercial Court and that he had carefully considered the claim in draft, authorised its commencement once he had been appointed, followed the progress of the action and kept the position under constant review.

Mr Kotov

37. In his second witness statement Mr Kotov largely referred back to his first witness statement to explain why he supported the appointment of a provisional liquidator and the commencement of the Commercial Court action and why he did not initiate the Commercial Court proceedings himself. In the final sentence of his paragraph 17 he expressed the view that it would be in the best interest of "the case, the creditors, Yugraneft and society" for Yugraneft's bankruptcy proceedings in the UK and the Commercial Court proceedings to be managed by an English liquidator based in London.
38. In his fourth witness statement Mr Kotov said that if it ever became necessary for him to do so he would be "willing and able to take the necessary steps to… assume conduct of the Commercial Court proceedings" and stated his belief that an English liquidator would be best qualified to supervise proceedings in England. He also said that he was in fear for his personal safety because of three anonymous telephone calls made to his mobile telephone in December 2005 followed by an intimidating meeting with a representative of a bank's security service acting on behalf of unspecified clients, who suggested that Mr Kotov should "not take any inappropriate action" in filing lawsuits on behalf of Yugraneft. As a result he asked Sibir to provide him, as they have, via a security firm, with armed bodyguards when he is in Russia.
39. The applicants submit that on this evidence there is no real possibility of benefit arising out of the winding up proceedings and there is therefore no need for the Court to exercise its insolvency jurisdiction. This is not a case where there is no prospect that Yugraneft's domestic court will act to wind it up. Further there is no sufficiently strong connection with England to justify the making of a winding up order. Yugraneft's registered office, staff, and place of business are in Russia. The transaction said to give rise to the alleged cause of action i.e. the issue of the participation interests occurred in Russia and those interests are Russian interests.

The petitioners' submissions

40. Mr Robin Dicker, QC, for the petitioners submits that sufficient connection with the jurisdiction is satisfied if, as for these purposes I assume, Yugraneft has an arguable claim against Millhouse and Mr Abramovich. As a matter of policy it would be highly undesirable if the presence of assets were not sufficient; Re Compania Merabello per Megarry J at pages 86G, 88A and 88D-E ("As Harman J observed at first instance in the Banque des Marchands case ... it would be most unfortunate if the existence of assets did not confer jurisdiction ...").
41. In Re Latreefers No 2 Morritt, LJ, said that the existence of assets within the jurisdiction would in the normal course constitute good reason for making the order. Given the existence of an asset of substance within the jurisdiction, such as a potentially valuable chose in action, it is not necessary to look for some further or better connection with the jurisdiction. He draws attention to the formulation of the first requirement in Halsbury's Laws Vol 7(4) para.1157 ("... may be wound up ... if it has assets in England or a sufficient connection with England can be shown ...").
42. As to the second requirement, a reasonable possibility of benefit is established if the petitioners can show that the Commercial Court action has a reasonable possibility of success. In relying on Megarry J's formulation (" If it is shown that there is no reasonable possibility of benefit accruing to creditors from making the winding up order, the jurisdiction is excluded.") the defendants have misconstrued the point which Megarry J was making.
43. In Re Compania Merabello the petitioner claimed that it was for those opposing the petition to show that no possible benefit could come from making a winding up order (page 89C). The insurer contended that the company's only asset (its claim against the insurer) would be taken out of the winding up and vested in the petitioners under the Third Party (Rights Against Insurers) Act 1930. Megarry, J, drew a distinction between the winding up process and the winding up order (page 90A). He noted that it could be said that the petitioner did not really want to bring about the winding up process and only wanted the order so as to secure a personal benefit. But he held that this did not exclude jurisdiction (page 90A-C). A personal benefit flowing to the petitioner would be sufficient, even if it was not one which would flow to him through the medium of the winding up process but only from the making of the winding up order (page 90C-F). A winding up order would be made even though, once the order was made, nothing further would be required to be done in the liquidation.
44. Mr Dicker went on to submit that any suggestion that it is essential that the winding up achieves something which would not otherwise be achievable is contrary to principle and authority. No such requirement exists in a domestic context, where, as between it and the company, a creditor is entitled to a winding up order ex debito justitiae. Nor is there any support for the existence of such a requirement in relation to a foreign company. No doubt there must be something of utility for a liquidator to do (alternatively, following Re Compania Merabello, at least some utility from the order). But the petitioner does not have to show that what the liquidator is to do, cannot be achieved in any other way.
45. Nor, Mr Dicker submitted, is there any requirement that there should be no prospect of the company being wound up in its place of incorporation. The correct position is stated in Halsbury's Laws Vol 7(4) at para.1159 ("... the jurisdiction of the Court to make a winding up order is unaffected by the fact that a liquidation has already commenced in the country of incorporation"). There are numerous examples in the authorities of situations in which the English Court has made a winding up order in respect of a foreign company despite the fact that it is in liquidation in its place of incorporation.

Discretion

46. Mr Dicker submitted that the Court should use its discretion to wind up Yugraneft for a number of reasons. Firstly, the Court will pay heed to the wishes of the relevant classes, namely creditors and contributories. Sibir and associated companies represent more than 75% of the claims admitted in the Russian liquidation.
47. Secondly the petition is supported by the Russian Liquidator, who was appointed to act in the best interests of the creditors as a whole. It cannot be contrary to comity to make a winding up order in those circumstances. On the contrary a refusal to do so would be more likely to be contrary to comity, which requires not only that the English courts should refrain from interference in circumstances where it would be inappropriate to do so but also that it should lend assistance when needed.
48. A number of authorities emphasise the need to provide assistance. See, for example, Banque Indosuez SA v Ferromet Resources Inc per Hoffmann J at pages 117-118 ("The Court ... will do its utmost to cooperate with the United States Bankruptcy Court and avoid any action which might disturb the orderly administration of Inc in Texas under ch 11"). The Cambridge Corpn case is another example; see the reference to "active assistance" at page 518A.
49. A similar approach has been given statutory support in the context of corporate insolvency. The development started with the introduction of s 426 of the Act. That Act applies to various relevant countries and territories which have been designated by the Secretary of State (s 426(11) (b)). The list does not at present include Russia. Section 426(5) provides that, "The courts having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having corresponding jurisdiction in any ... relevant country or territory." The word "shall" means that the English Court ought to give the assistance requested unless there are "powerful reasons why this should not be done." See, for example, Re Dallhold Estates Ltd per Chadwick J at page 399G-H.
50. More recently, this approach has been emphasised by the introduction into English law of the UNCITRAL Model Law by the Cross-Border Insolvency Regulations. This law does applies where assistance is sought in this country by a foreign representative, including one appointed in Russia, in connection with a foreign proceeding.
51. The Regulations provide for a number of different ways in which assistance can be provided; see e.g. Articles 9 and 11 (direct access), Articles 15-24 (formal recognition) and Articles 28-31 (concurrent proceedings). There is no requirement, for example, that assistance by way of formal recognition will only be provided if direct assistance is not possible; or that concurrent proceedings will not be permitted where formal recognition can be provided.
52. The intention of the Cross-Border Insolvency Regulations is to ensure that all proper assistance can be and is provided to a foreign office holder. See, for example, Article 25 ("... the Court may cooperate to the maximum extent possible with foreign courts or foreign representatives ...") and Article 27 (co-operation may be implemented "by any appropriate means").
53. Thirdly, the petition is also presented by MOGC which holds more than 50% of the shares in Yugraneft. It is not opposed by the company or other creditors.
54. The reasons why the petitioners and the liquidator consider that the making of a winding up order and the appointment of a liquidator would be in the best interest of the creditors of Yugraneft are straightforward and should command acceptance. It is desirable that the person responsible for pursuing the litigation on behalf of Yugraneft should be an English licensed insolvency practitioner experienced with litigation in England; as opposed to Mr Kotov, whose first language is not English and who has no experience of litigation in England let alone litigation of this magnitude. In addition the making of a winding up order would reduce the risk of the Commercial Court proceedings being automatically affected by anything that might happen in the Russian liquidation such as the removal of Mr Kotov or a failure to renew his appointment or if steps were taken to try to conclude the Russian liquidation before the conclusion of the Commercial Court proceedings. The creditors of Yugraneft would prefer Mr Cork to be in charge of the litigation and the Court should permit their views to prevail. The Court should give little, if any, weight to Millhouse's views. Its claim against Yugraneft, which it acquired in March 2008, is for some £9,302 and represents about 0.03% of the total admitted claims. Whilst the debt gives it locus standi to appear, as a creditor, its views should not carry any weight. Nor should those of Mr Abramovich.
55. The petitioners also submit that the applicants' view that Mr Cork brings nothing of benefit to the case should be ignored. The issue of whether Yugraneft would do better if Mr Kotov or Mr Cork was responsible for pursuing the claim is an issue concerning the internal management of Yugraneft with which they are not concerned. The applicants' reasons for objecting to a provisional liquidator are unlikely to be based on what they consider to be in the best interests of the creditors rather than themselves as defendants. The contention that the petitioners could get everything that they wanted from a winding up order in some other way begs the question of what is meant by everything. The petitioners were and are entitled to seek the assurance that the Commercial Court proceedings would be commenced and continued by an insolvency practitioner, other than Mr Kotov, whose authority would not be in question. Although they did not in fact do so the defendants might have contended that Mr Kotov lacked authority to commence and continue the proceedings, or events in Russia might imperil his ability to do so.

Conclusions

56. This is not a case where a winding up order is sought because without it the petitioners cannot get relief e.g. because the company has ceased to exist or is moribund and there is no prospect of it ever becoming the subject of liquidation proceedings, as in Banque des Marchands; Merabello; and Allobrogia. On the contrary Mr Kotov could have launched the Commercial Court proceedings whether or not winding up proceedings were launched and a liquidator appointed. It follows from that that the Petitioners cannot rely on impossibility, or severe difficulty, in launching the Commercial Court proceedings as a ground for ordering a winding up.
57. The dispute resolves itself, as it seems to me, into a question as to whether or not the chose in action constituted by the Commercial Court claim constitutes an asset which affords a sufficient connection with England and whether there is a reasonable possibility of benefit to those applying for the winding up order.
58. As to the former, I accept that the fact that there is an asset within the jurisdiction to which the company lays claim is not automatically a reason for the Court to exercise the winding up jurisdiction. The asset may be so small or of such a character that the link with the jurisdiction said to be constituted by it is too tenuous to justify invoking the winding up jurisdiction. In Real Estate the links with the jurisdiction relied on consisted of (i) a French judgment against a Kuwaiti borrower registered in England; (ii) 98 shares in an English registered company, but with non UK directors, a non UK business and non-UK assets, those shares being in the ownership of another Kuwaiti company to which they had been transferred between the oral judgment in proceedings in Paris and the formal judgment; and (iii) a possible action in an English Court (against a non-UK defendant) under section 172 of the LPA 1925 to set aside the share transfer. Only (ii) was treated as locally situated in England. The possible action under section 172 was not an asset locally situated at the date of the petition because it would only arise if a winding up order was made. The links with England were regarded as insufficient.
59. In the present case Yugraneft asserts a claim for $2 billion against an English company and Mr Abramovich, who, on the hypothesis that the Commercial Court proceedings were to go ahead would either be resident in England or a necessary or proper party to the claim against Millhouse, and, in either event, subject to the jurisdiction of the English Court. Such a claim is in my view an asset which constitutes a sufficient link with England.
60. As to the possibility of benefit, there is said to be a tension between the Merabello formulation ("reasonable possibility of benefit accruing to creditors from making the winding up order") and that in Real Estate ("a reasonable possibility if a winding up order is made, of benefit to those applying for the winding up"). I regard this point as largely semantic. If the petitioners seek a winding up order they must establish that the making of it will be of some benefit to them. This was the point that Megarry and Knox, JJ, had in mind by their respective formulations, that of Megarry, J, being fashioned in order to take account of the distinction between benefiting from the order and benefiting from the winding up process. That is not the same as saying that the winding up jurisdiction cannot be invoked if the same, or a similar, benefit can be achieved by other means, so that winding up is a remedy of last resort. The fact that a similar result could be achieved by other means might be a reason for declining to exercise the winding up jurisdiction; but whether it does or not must depend on all the circumstances.
61. In the present case the appointment of Mr Cork as provisional liquidator and his appointment, in all probability, as liquidator following a winding up, would have meant that the Commercial Court proceedings were under the superintendence of a licensed insolvency practitioner well versed in the intricacies of English litigation of this size and complexity, who was an officer of, accountable to, and subject to the direction of the English Court. This appears to me to be an advantage that the petitioners may legitimately seek.
62. The appointment of a provisional liquidator, and then a liquidator, would afford to the petitioners the assurance that there would be someone supervising the Commercial Court proceedings whose appointment was fixed by the Companies Court and subject to revocation only by that Court or by a general meeting of the creditors, and who would conduct the liquidation in England as an ancillary to the Russian liquidation, under English law rules. The petitioners would thus be protected if, for whatever reason, Mr Kotov's appointment as liquidator was terminated or not renewed, contrary to the wishes of the creditors; or if, for some reason, Mr Kotov were to have an inexplicable change of heart or, for whatever reason, was unable to continue.
63. Mr Boyle submits that there is no need for Mr Cork to be appointed as provisional liquidator on this basis. Mr Kotov has successfully seen off challenges to his actions, and his appointment as liquidator has been renewed. for another year. Whilst I see the force of these points, they do not in my view mean that there is no real benefit to the Petitioners in having a Court appointed liquidator, not least because it cannot be said that the contingencies to which I referred in the previous paragraph are completely remote.
64. Further, in this context it is of importance to take into account the views of the foreign liquidator and the petitioners (if, as here, they are representative of a large proportion of the creditors and contributories). It is one thing to decline to exercise the winding up jurisdiction in circumstances where the foreign liquidator is opposed to ancillary proceeding in England. It is quite another to decline to exercise the jurisdiction when the foreign liquidator, the principal creditor, and a 50% shareholder all invite its exercise. In my judgment the Court should incline to exercising its jurisdiction in such circumstances. The policy of the Legislature to afford assistance to foreign representatives is exemplified in s 426 of the Act and the Cross Border Insolvency Regulations. The dicta in Banque des Marchands cited in paragraph 11 above were not made in circumstances in which the foreign liquidator actively supported the proposed winding up.
65. On the contrary, it seems to me that I should give little weight to the objections of the applicants. Whether the Commercial Court action is one brought by Yugraneft on the authority of Mr Kotov, or the provisional liquidator, or both, does not appear to me to be of much significance for the defendants, nor are they prejudicially affected by adopting one course rather than the other, unless, perhaps (which they have not suggested) they apprehend that Mr Kotov may in the future be removed from his position and that a different liquidator may be disinclined to continue the action.
66. Accordingly, subject to the non-disclosure point, if I had rejected the applications to dismiss the Commercial Court proceedings, I would not have declared that the court should decline to exercise its winding up jurisdiction.

Non-disclosure

67. The applicants submit that, in making their application to Evans Lombe J in November 2007 the Petitioners owed duties of full and frank disclosure, as a series of well-known authorities establish; e.g. R v Kensington Income Tax Comrs, ex p Princess Edmond de Polignac [1917] 1 KB 486 ("the fullest possible disclosure of all material facts") .
68. As Bingham, LJ, said in Siporex Trade SA v Comdel Commodities Ltd [1986] 2 Lloyd's Rep 428. 437 an applicant for ex parte relief must:

"identify the crucial points for and against the application, and not rely on general statements, and the mere exhibiting of numerous documents…He must disclose all facts which reasonably could or would be taken into account by the judge in deciding whether to grant the application. It is no excuse for an applicant to say that he was not aware of the importance of matters he has omitted to state. If the duty of full and fair disclosure is not observed the Court may discharge the injunction even if after full inquiry the view is taken that the order made was just and convenient and would probably have been made even if there had been full disclosure".

69. In Memory Corporation v Sidhu (No 2) [2000] 1 WLR 1443, 1459-1460 Mummery LJ said:

"It cannot be emphasised too strongly that at an urgent without notice hearing for a freezing order, as well as for a search order or any other form of interim injunction, there is a high duty to make full, fair and accurate disclosure of material information to the Court and to draw the Court's attention to significant factual, legal and procedural aspects of the case. It is the particular duty of the advocate that … at the hearing, the Court's attention is drawn by him to unusual features of the evidence adduced, to the applicable law and to the formalities and procedure to be observed …"

70. Amongst the principles set out by Ralph Gibson LJ in Brink's Mat Ltd -v- Elcombe [1988] 1 WLR 1350.1356 was this:

"(2) The material facts are those which it is material for the Judge to know in dealing with the application as made: materiality is to be decided by the Court and not by the assessment of the Applicant or his legal advisers."

71. In Re City Vintners Ltd, (Unreported 10^th December 2001) , a case in which a provisional liquidator was sought inter alia on the grounds that the assets of the company were said to be in jeopardy, Etherton J referred to the passage from Memory Corporation -v- Sidhu (No 2) quoted above, and then said:

"Full disclosure of these matters is of particular and critical importance in relation to applications for the appointment of a Provisional Liquidator."

He went on to draw attention to the passage in Paragraph 5.16 of the Chancery Guide which states:

"The representatives for the Applicant must specifically direct the Court to passages in the evidence which disclose matters adverse to the application."

72. The rationale for the duty is plain:

"The reason for this requirement is obvious: the Court is being asked to grant relief in the absence of the defendant and is wholly reliant on the information provided by the claimant. Moreover, it is not only the duty of the claimant to disclose material facts: he must also present fairly the facts which he does disclose." ^[3]

"The principles are well-established and well-known on applications without notice for injunctions and other interim relief, but they are fundamental to the proper functioning of the Court's process on any application without notice. It is of course the very fact that the application is made without notice to other interested parties which makes these principles so important. Other parties do not have the opportunity to correct or supplement the evidence which has been put before the Court." ^[4]

The petitioners' submissions

73. The petitioners do not dispute that they owed a duty to disclose to the Courts all facts relevant to the application that they were making. But they point out that this was an application in which any dispute, if there was one, would be between (a) the petitioners, (b) the other creditors; and (c) the company. Moreover the application was not for a freezing order or, indeed, for any order preventing any disposition of assets, nor would the order be likely to bring a business to a halt. It was solely an application for the appointment of a liquidator who would authorise an action on the company's behalf.
74. Accordingly the petitioners needed to deal with questions of jurisdiction and the requirements identified in the cases, which they did. But they did not need to treat the applicants as if they were respondents to the petitioners' application and disclose to the Court every point which the petitioners might in due course wish to raise in the course of the Commercial Court proceedings. The petitioners' application was not one in respect of which the applicants had a legitimate interest. They were not entitled to notice of the hearing, nor, on their own case, did the order itself affect them because, even if the provisional liquidator had not been appointed, the Commercial Court proceedings could still have been issued against them by Mr Kotov.
75. In my judgment the petitioners understate the extent of their obligation. The basis for seeking a provisional liquidator was that he would pursue the Commercial Court proceedings against the defendants. The primary basis for asserting that Mr Abramovich was subject to the jurisdiction of the English Court was that he was resident in England. The basis upon which relief was said to be urgently needed was the prospect that he would decamp. The Commercial Court claim was the latest in a sequence of civil claims in the BVI and civil and criminal claims in Russia. The petitioners gave evidence of all these things. In those circumstances it was incumbent on the petitioners to give a full and fair account of factors known to them which indicated that the claim might be invalid, that Mr Abramovich might not be resident in England or likely to change such residence, and to give a full and fair account of the previous proceedings.

The material before Evans-Lombe, J

76. At the hearing before him on 14^th November 2007 Evans-Lombe, J had before him: (a) a skeleton argument; (b) Mr Friedman's second witness statement; (c) the petition; (d) the draft Commercial Court Particulars of Claim; and (e) Mr Kotov's witness statement. The skeleton told the judge that "it is not thought necessary that any of the other documents exhibited should be read prior to the hearing" and that 2 hours' reading time should be allowed.
77. Mr Friedman's second affirmation gave details of Yugraneft's claim. It stated that although many of Mr Abramovich's investments were related to Russian companies, his personal interest was held through offshore companies managed by Millhouse Capital, "reflecting the fact that Mr Abramovich has made England the centre of his business and domestic life". The affirmation set out details of the companies shown in the charts of company structures to which I have referred in my earlier judgment, and their part, where relevant, in the dilution of Yugraneft's interest in Sibneft-Yugra, and gave details of Mr Abramovich's properties in Lowndes Square.
78. Mr Friedman gave details of the Russian litigation and the fact that Yugraneft had so far failed. He said that that failure was not because of any adverse determination on any of the issues raised in the proposed action in England.

"On the contrary, the focus of the Russian litigation has been technical objections to the corporate acts that were undertaken by Mr Matevosov and Mr Davidovich as part of the dilutions. The Russian courts have not addressed their conduct as part of a fraud, and the limited allegations of bad faith which have been raised have not been adjudicated upon, because it is difficult to interest civil judges in a matter that they regard as criminal before a criminal prosecution has occurred, as explained by Professor Sergeev in his report. The Russian prosecutor has so far refused to pursue a criminal case, albeit that his seem difficult to sustain reasons. I have been informed by Mr Ivanyan that there have been recent indications that the prosecutor has rescinded his earlier refusal and may be prepared to review the position…"

79. Mr Friedman's statement exhibited the decisions at first instance and on appeal in the BVI, and summarised the decision of the Court of Appeal. He pointed out that no findings were made as to whether a fraud had been committed against Yugraneft, still less a fraud to which Mr Abramovich and Millhouse were parties and added:

"It is also the position that insofar as Russian law issues arise, the expert evidence in the BVI proceedings did not cover the availability of fraud based claims under Russian law against Mr Abramovich and Millhouse Capital and Yugraneft has obtained a detailed report from Professor Sergeev which cogently analyses the flaws in the expert evidence before the BVI Court and sets out the bases for liability of Mr Abramovich and Millhouse Capital under Russian law."

80. Mr Friedman made it plain that the primary basis upon which Yugraneft claimed that the Court had jurisdiction over Mr Abramovich was that he was resident in the UK with which he had a substantial connection. He then set out reasons for believing that Mr Abramovich was resident in London. He referred to the fact that:

"Although Mr Abramovich and his spokesmen have from time to time made statements that his main home is not in the UK, but in Russia …the serious international press (including in Russia) have consistently referred to the UK being his principal home and that he only makes occasional visits to Russia. Indeed, in a transcript of an interview with Viktor Grishin, chair of the State Duma Committee for Federation Affairs and Regional Policy, and Valery Khomyakov, Director General of the Council for National Strategy on 9 November 2005, a member of the public phoned in to ask: "Should the chief executive of a region live and work in the region that he represents? If the answer is yes, why does Abramovich, who has been appointed governor, permanently live in London?" ^[5]

81. The basis upon which the appointment of a provisional liquidator was sought was that, pending the hearing of the petition the proposed defendants were likely to become aware of the petition and its intended purpose and that there was a risk that they would take action designed to obstruct the proposed action in some way, "whether (in the case of Mr Abramovich) by taking steps to change his domicile or by some other means." Mr Friedman suggested that the action, when added to that commenced by Mr Berezovsky, might tip the balance of advantage to Mr Abramovich away from having "his personal and business base in England."
82. In his witness statement Mr Kotov said that he understood that the primary basis on which Sibir applied for the appointment of a provisional liquidator was to enable the provisional liquidator to commence proceedings so as to minimise as far as possible the risk that Mr Abramovich and possibly Millhouse Capital would take steps to obstruct Yugraneft before Sibir's petition could be heard and determined.
83. The skeleton argument contended that the claims in the proposed Commercial Court action were probably governed by English law. It referred to the concerns of Sibir and Mr Kotov that any delay in commencing the action would increase the risk that Mr Abramovich might take steps designed to obstruct the pursuit of the claim.
84. At the hearing the judge, who plainly had doubts as to whether what he was being asked to do might be an abuse of the jurisdiction to appoint a provisional liquidator, was told by Counsel in respect of Mr Abramovich that "We believe he is likely to be, he is certainly resident here", and that the concern was that by the time of the proceedings he might have so organised his affairs that he could then say that he was no longer resident in the jurisdiction. Mr Dicker accepted that Mr Kotov could "in theory" cause the company to commence proceedings itself, but that it would be better if the claim was run by an officer of the court who was familiar with English legal process. The judge was referred to the Cross Border Insolvency Regulations. He expressed himself persuaded to appoint a provisional liquidator on the basis that that would trump a possible argument about the ability to commence proceedings which might arise if Mr Abramovich altered his position between the date of the hearing before him and the commencement of proceedings following a winding up order.

What the judge was not told

85. The judge was not told:

(a) that in the BVI proceedings Sibir, both in Mr Cameron's statement and in the Particulars of Claim, had alleged that Mr Abramovich was resident in England; and that Mr Abramovich had denied this on oath ("I am not"); had said that he was resident in Russia; and had explained that the fact that he had property in England and owned Chelsea Football club (just as an American owns Manchester United) did not mean that he resided here, in the light of his extensive property elsewhere; and

(b) that the BVI courts had accepted that Russia was the country of habitual residence and centre of operations of Sibir and of all of the defendants, including Mr Abramovich (see para 24 of the decision of the Court of Appeal; and para 25 of the decision at first instance; see also paras 143, 152 and 161).

The alleged non-disclosures

86. The applicants contend that there was a failure of the duty of full disclosure in the following respects.

Lack of evidence of fraud

87. Firstly, the petitioners did not disclose to the judge that there was a total lack of evidence to support the allegations (i) that Mr Abramovich might flee the country in order to avoid being resident in England at the date of the issue of the proceedings; (ii) that Millhouse orchestrated the alleged dilutions; and (iii) that Mr Davidovich's explanation as to the reason for the issue of participation interests in Sibneft-Yugra was "entirely false" (para 49 of Mr Friedman's 2^nd affirmation).
88. Subject to two important caveats, I am not persuaded that there was a culpable non-isclosure under these heads. On the material set out in Mr Friedman's affirmation that Yugraneft had been the victim of a massive fraud, for Mr Abramovich's benefit and at his behest, Mr Davidovich's explanation was entirely false, and it could be inferred that Millhouse played a role in the fraud. If so, and if Mr Abramovich was resident in England, it was legitimate for the petitioners to apprehend that he might cease to reside in England if he learnt that a claim was afoot. But that begged the question: (i) whether Mr Abramovich was in fact resident here; and (ii) whether there was material that cast a different light on the existence of the supposed fraud. These matters are the subject of the further non-disclosures alleged.

Non-disclosure in relation to Mr Abramovich's residence

89. Secondly, the assertion (no doubt based on the evidence presented) that Mr Abramovich was "certainly resident here" was a serious overstatement of the position. As I have now held, the balance of the argument is decidedly against that proposition. Further the case that Mr Abramovich's principal home was in England and that he made "only occasional visits to Russia" was a travesty of the truth. More importantly for present purposes, no indication was given to the judge that Mr Abramovich had given sworn evidence expressly to the contrary in the BVI proceedings and that such evidence had been accepted by the BVI courts. The assertion that Mr Abramovich was resident in England was of particular significance since the reason why an order for a provisional liquidator was sought was in order to avert the supposed danger of Mr Abramovich changing his residence when he learnt of the claim.
90. Mr Friedman in his fifth witness statement has said that he did not disclose the BVI Court's findings because he ".. did not believe that they represented findings in any proper sense." This indicates that he addressed his mind to the question of disclosure and decided that it was unnecessary for that reason. I do not regard this as an acceptable explanation. It seems to me that it was plainly material for the judge to know that in the earlier proceedings between Sibir and Mr Abramovich the Court had proceeded, in the light of his evidence, on the basis that Mr Abramovich was resident in Russia, even though there had not been a thorough investigation of all the evidence and a trial, or mini-trial, of that issue. At the very lowest it was potentially material and should have been before the judge (otherwise than by being buried in exhibited judgments which the judge was not invited to read), in order for him to decide whether he thought it material. This was so even though: (a) it was apparent that there would be an issue over domicile; and (b) an alternative basis for jurisdiction was that Mr Abramovich was a necessary or proper party to the claim against Millhouse.

The decisions of the Russian courts

91. Yugraneft claims that the issue of further participation interests in Sibneft-Yugra was wrongful. The applicants complain that the petitioners did not draw the judge's attention to the fact that the issue of whether Mr Matevosov and Mr Davidovich had acted wrongfully and in breach of their fiduciary-like duties to Yugraneft had been decided adversely to Yugraneft in the Russian courts. Mr Friedman referred to the fact that the focus of the Russian litigation had been on technical objections to the corporate acts undertaken by those two as part of the dilutions and that the limited allegations of bad faith which had been raised had not been adjudicated upon.
92. I am not persuaded that there has been non-disclosure under this heading. In case A 75-4601/2005 Yugraneft asserted in its submissions at the first appeal stage that Mr Davidovich had acted against Yugraneft's interests by voting in favour of the dilution resolutions. But the Arbitrazh Appeal Court for Khanty-Mansiysk, although finding that Mr Matevosov was authorised, does not appear to have addressed, or made findings in respect of, this allegation. In two other cases dealing with the claim that Yugraneft's pre-emption rights had been violated – A40-30097/04-24-355 and A 40-30094/04-61-366 – the Court did not deal with allegations of fraud or breach of duty. In the former case the Court expressly declined to deal with the allegation that Mr Matevosov's actions showed signs of "premeditated bankruptcy" on the ground that it "related to the sphere of criminal law regulation."

The first ruling of the Senior Investigator

93. In his evidence Mr Friedman had referred to the first ruling of the Russian Senior Investigator in the following terms:

"The Russian prosecutor has so far refused to pursue a criminal case, albeit that his seem difficult to sustain reasons. I have been informed by Mr Ivanyan that there have been recent indications that the prosecutor has rescinded his earlier refusal and may be prepared to review his position, but it is uncertain whether he will do so."

94. The judge was not asked to read the first ruling, which was exhibited, nor was it referred to in the skeleton argument or in the oral presentation to the Court. Nor was the complaint contained in the 2,000 odd pages of exhibits. As a result there was no disclosure to the judge of the following facts:

i. that the complaint was instigated by Mr Kotov himself and that it alleged (in one version, albeit possibly not the version as filed) that Mr Abramovich, Mr Davidovich and Mr Korsik "and other persons, guided by lucrative impulse, formed an organised group and by means of fraud and breach of trust caused an extensive property damage to the owner [Yugraneft]." This was, as Mr Kotov would have known, the central allegation in the present case. The other version of the complaint refers to an organised group consisting of Mr Matevosov and "other persons" with a similar aim^[6];

ii. that the Senior Investigator had interviewed both Mr Davidovich and Mr Tchigirinsky;

iii. that he had accepted that the increase in the charter capital in Sibneft-Yugra had been agreed between Mr Tchigirinsky and Mr Davidovich in order to provide security for the loan made by Sibneft ;

iv. that the ruling that there was insufficient data revealing the commission of a crime constituted a formal finding in Russia; and

v. that Mr Kotov had a right of appeal which he had failed to exercise.

95. The petitioners also did not reveal that in, or in connection with, the criminal

proceedings a number of allegations were made which appeared to be false i.e.: (a) the allegation that Mr Tolley had replaced Mr Matevosov on 10^th September 2002 ^[7]; (b) that it was Mr Korsik who proposed Mr Matevosov as General Director of Yugraneft ^[8], when the relevant minute shows that it was Mr Cameron who proposed him; and (c) that the offshore companies never fulfilled their obligations to provide finance ^[9]. Nor did they disclose that Yugraneft had put forward in proceedings in Russia what purported to be a board minute of the 10^th September 2002 which was highly questionable in the light of Mr Tolley's evidence that he was not approached for the position until September 2003.

96. In my judgment Evans-Lombe's attention should have been drawn to the content of the first refusal and, in particular, items (i) – (v) set out in paragraph 94 above. The judge's attention should also have been drawn to the fact that Yugraneft had at one stage alleged that Mr Tolley had replaced Mr Matevosov, and that this allegation had been rejected by the Russian courts, which heard evidence from Mr Tolley (to which he should have been referred) and that, contrary to what the complaint said, it was Mr Cameron who proposed the election of Mr Matevosov at a meeting not attended by any Sibneft representative. The third matter referred to in paragraph 95 above does not appear, so far as I can tell, from the complaint and I do not think it incumbent on the applicants to have alerted the judge to the fact that this allegation had been made and rejected (in the second ruling which was not then to hand).

The fraud issue in the BVI proceedings

97. Mr Friedman explained in his second witness statement that the BVI Court of Appeal had held that all the pleaded claims against the BVI companies were in knowing receipt and that the governing law of those claims was Russian law. He also recorded the common ground between the experts for the parties that there were no claims under Russian law against the BVI dilution companies. In paragraph 98 he said:

"It is also the position that insofar as Russian law issues arise, the expert evidence in the BVI proceedings did not cover the availability of fraud based claims under Russian law."

98. This statement is not correct. Professor Butler's evidence was that Yugraneft would be unlikely to establish any civil cause of action (including any claim of a restitutionary nature) against any of the defendants, who included Mr Abramovich (other than claims based on procedural irregularities in respect of the EGMs), and that neither Sibir nor Yugraneft would have any claim against either Mr Matevosov or Mr Davidovich on present facts. Mr Rozenberg was of the same view. Professor Butler was obviously considering fraud because he observed that, although the only civil claim was one under the joint venture agreement, on the facts each of the defendants was party to a conspiracy to defraud Sibir, which would be subject to criminal sanction. Sibir relied on the absence of such claims by it or Yugraneft as the basis for an argument that Russia was not the appropriate forum.
99. Mr Friedman now accepts that both experts must have proceeded on the basis that Sibir's claims were fraud-based and that he was wrong to suggest otherwise, for which he apologised. He points out, correctly, that Professor Butler did not in his report address the possibility of (and, in that sense, cover) a claim for unjustified enrichment on the basis of fraud, confining himself to considering a claim under the joint venture agreement and claims in respect of: (a) vindication; (b) a void transaction; (c) return of property when the consideration has wholly failed; and (d) violation of a right of first refusal.
100. I have no doubt that Mr Friedman did not intend to mislead the Court. But the judge should have had his attention drawn specifically to the fact that in the BVI Sibir had been saying that there was, on the facts relied on, no claim under Russian law, even though there was fraud. This was plainly material which potentially weakened Yugraneft's position. The judge should not have been left with the impression that the experts had not addressed their minds to whether there was a claim if fraud was established. To be fair to him, Mr Friedman plainly indicated that Professor Sergeev was saying that there were flaws in the expert evidence before the BVI courts.

Conclusions on non-disclosure

101. In summary, the petitioners should have but failed to disclose: (a) Mr Abramovich's evidence in the BVI proceedings about his residence and the fact that the BVI courts had accepted his Russian residence; (b) the terms of the first refusal and the features of it summarised in paragraph 94 above; (c) the further matters set out in paragraph 96; and (d) that the question of civil recovery on any basis, including fraud, had been addressed in the BVI courts.

Consequences

102. Mr Boyle drew my attention, with appropriate diffidence, to a decision of his own, sitting as a Deputy Judge of the Chancery Division, as to the approach to be taken by the Court in the event that there is culpable non-disclosure. In The Arena Corporation Limited -v- Schroeder [2003] All ER (D) 199 (May), [2003] EWHC 1089 (Ch) at paragraph 213, he summarised the main principles which should guide the Court in the exercise of its discretion as follows:

"(1) If the Court finds that there have been breaches of the duty of full and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial.

(2) Notwithstanding that general rule, the Court has jurisdiction to continue or re-grant the order.

(3) That jurisdiction should be exercised sparingly, and should take account of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.

(4) The Court should assess the degree and extent of the culpability with regard to non-disclosure. It is relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge of the order. Equally, there is no general rule that a deliberate breach will attract that sanction.

(5) The Court should assess the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the Court. In making this assessment, the fact that the judge might have made the order anyway is of little if any importance.

(6) The Court can weigh the merits of the plaintiff's claim, but should not conduct a simple balancing exercise in which the strength of the plaintiff's case is allowed to undermine the policy objective of the principle.

(7) The application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice.

(8) The jurisdiction is penal in nature and the Court should therefore have regard to the proportionality between the punishment and the offence.

(9) There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the Court should take into account all relevant circumstances.

103. I regard that as a helpful review of the applicable principles, subject to the overriding principle, reflected in proposition (9), that the question of whether, in the absence of full and fair disclosure, an order should be set aside and, if so, whether it should be renewed either in the same or in an altered form, is pre-eminently a matter for the Court's discretion, to which (as Mr Boyle observes at paragraph 180) the facts (if they be such) that the non-disclosure was innocent and that an injunction or other order could properly have been granted if the relevant facts had been disclosed, are relevant. In exercising that discretion the Court, like Janus, looks both backwards and forwards.
104. The Court will look back at what has happened and examine whether, and if so, to what extent, it was not fully informed, and why, in order to decide what sanction to impose in consequence. The obligation of full disclosure, an obligation owed to the Court itself, exists in order to secure the integrity of the Court's process and to protect the interests of those potentially affected by whatever order the Court is invited to make. The Court's ability to set its order aside, and to refuse to renew it, is the sanction by which that obligation is enforced and others are deterred from breaking it. Such is the importance of the duty that, in the event of any substantial breach, the Court strongly inclines towards setting its order aside and not renewing it, so as to deprive the defaulting party of any advantage that the order may have given him. This is particularly so in the case of freezing and seizure orders.

.

105. As to the future, the Court may well be faced with a situation in which, in the light of all the material to hand after the non-disclosure has become apparent, there remains a case, possibly a strong case, for continuing or re-granting the relief sought. Whilst a strong case can never justify non disclosure, the Court will not be blind to the fact that a refusal to continue or renew an order may work a real injustice, which it may wish to avoid.
106. As with all discretionary considerations, much depends on the facts. The more serious or culpable the non-disclosure, the more likely the Court is to set its order aside and not renew it, however prejudicial the consequences. The stronger the case for the order sought and the less serious or culpable the non-disclosure, the more likely it is that the Court may be persuaded to continue or re-grant the order originally obtained. In complicated cases it may be just to allow some margin of error. It is often easier to spot what should have been disclosed in retrospect, and after argument from those alleging non-disclosure, than it was at the time when the question of disclosure first arose.
107. In the present case, as it seems to me, there has been substantial non-disclosure on more than one account in the respects summarised in paragraph 101 above. The matters not disclosed were not peripheral to the case which Yugraneft sought to assert or to the alleged urgency of the application. Whilst I have no doubt that there was no intention to mislead the Court I am satisfied that, for whatever reason, inadequate disclosure was made to Evans-Lombe, J., and that the extent of the non-disclosure is such that, had I not struck out the claims, I would have set aside the order appointing a provisional liquidator and dismissed the claim. It would then be open to Yugraneft to commence new proceedings. Any question of limitation or as to Mr Abramovich's residence would fall to be addressed as at the date of the new proceedings.
108. I would have done that in order to ensure that Yugraneft gained no advantage by obtaining the order for the appointment of a provisional liquidator, as it would have done if I did no more than set aside the order for the appointment of a provisional liquidator and made a winding up order.
109. The Commercial Court action was issued by Clyde & Co acting under the authority of the provisional liquidator, whose appointment the Petitioners had sought. Mr Kotov made it plain to Evans Lombe J that he supported the petition that, insofar as it might be necessary or appropriate for him to do so he would authorise and request the provisional liquidator, once appointed to commence the proposed action. He also added that, if it became necessary for some unforeseen reason he would apply for formal recognition and pursue the proposed action here or cause Yugraneft to do so. But that proved unnecessary because the Court was persuaded to do what the petitioners sought and Mr Kotov supported. Paragraph 4 (5) of Evans-Lombe J's order specifically empowered Mr Cork to bring the Commercial Court proceedings in the name of the Company.
110. The fact that Mr Kotov in his second and third witness statements has said that he supported the appointment of Mr Cork and the Commercial Court proceedings and authorised and ratified the steps taken to date, cannot alter the fact that, as was always intended, the authority by which they were in fact commenced was that of Mr Cork acting as provisional liquidator, whose appointment was obtained without disclosure of all relevant facts. As Mr Friedman put it in his witness statement in support of the application for permission to serve Mr Abramovich out of the jurisdiction: "Mr Cork … was appointed in England to enable the present claims to be brought."
111. Neither Mr Kotov's approval of the initiation of proceedings nor the fact that the acts of the provisional Liquidator, are valid notwithstanding any defect in his appointment mean that the Court cannot strike out proceedings which have been commenced by a provisional liquidator whose appointment for the purpose of launching those proceedings has been obtained in circumstances where there has been significant non-disclosure. The issue of proceedings in those circumstances is an abuse of the process of the Court and the Court is entitled to take whatever steps are necessary to deprive the defaulting party of the fruits of his default.
112. As it is, in view of my findings on the reverse summary judgement applications, I shall simply dismiss the winding up petition.

Note 1   There is no doubt that this requirement is satisfied. Sibir is incorporated in England & Wales. MOGC has submitted to the jurisdiction for the purpose of the winding up.    [Back]

Note 2   The same point is made in Re Wallace Smith Group Ltd [1992] BCLC 989 at p 1007 (Edward Nugee QC sitting as a Deputy Judge)    [Back]

Note 3   As explained by Alan Boyle QC at § 117 in The Arena Corporation Limited -v- Schroeder (unreported), [2003] EWHC 1089 (Ch)     [Back]

Note 4   Per David Richards J inGhafoor  -v- Cliff [2006] 1 WLR 3020 at § 46    [Back]

Note 5   The transcript reveals that the question was never answered.    [Back]

Note 6   See paragraph 133 of my earlier judgment    [Back]

Note 7   This appears in the version of the criminal complaint which may well not be the version as presented.    [Back]

Note 8   This appears in both versions of the criminal complaint     [Back]

Note 9   This contention, contained in a statement by Mr Kotov, was rejected by the Senior Investigator in his second refusal.    [Back]